The Dwolla Balance – An Application Force Multiplier

By: Cory Anderson

November 7, 2019

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Bank transfers are often associated with Dwolla, and for good reason. Using today as an example, we’ll initiate upwards of 100,000 bank transfers. There are, however, times when transferring money to or from a bank account isn’t the only option for our API Clients and there may be an even better method that one can realize.

Enter: The Dwolla Balance

The Dwolla Balance is a great tool that can enhance an application and create a better experience within your application.

This funding source is systematically created for all API Clients, as well as identity-verified Customers upon successful verification of the user establishing an account with Dwolla.

Based on your particular use case and application’s funds flow, the Dwolla Balance can be a powerful tool to elevate bank transfers to something even more valuable.

Use Cases and Applications

Let’s walk through a few ways that the Dwolla Balance can be utilized in a wallet-like fashion, from the most basic, to the niche application.

Holding Funds

The most basic use case is the Dwolla Balance used by API Clients and Verified Customers alike to hold funds within the Dwolla Network at our partner financial institution. This can be accomplished by sending funds from an existing bank funding source to the Dwolla Balance. From here, the money can be held as a stored value or be pushed out at any time.

Handling Returned Funds

If an ACH transfer fails to reach a recipient’s bank account, the funds must go back somewhere. Let’s take a scenario where an API Client is using its application to send funds from its bank account to different Customers’ bank accounts. One of its Customers, unbeknownst to the API Client, has closed their bank account for unknown reasons.

In this situation, an initiated funds transfer cannot make it to the destination bank due to this closure. An ACH return will be issued and the Dwolla API Client will be notified via webhook. But what happens to the funds?

The funds will not simply disappear into the ether, but rather, be returned to the API Client’s Dwolla Balance. This allows maximum flexibility for Dwolla API Clients to decide the workflow for transfer failures within their application. Whether to send the funds back to the API Client’s bank, wait until the destination Customer adds a new bank to retry the transfer or just hold the funds in the network until a resolution is made.

Timely Payments

Dwolla API Clients that rely on paying out to their end users generally want to have funds transferred at the quickest timing possible. By pre-loading their balance funding source, they can manage to save three business days from the payout timing. We refer to the Dwolla Balance as having “wallet-like” functionality because it operates like a physical wallet in your pocket or purse, a place where money is ready to be used. You may have $100,000 in a bank account but if someone asks you for 25 cents to pay the meter, unless you have it on you, you’re helpless. Having funds pre-loaded in the Dwolla Balance means having funds ready, while cutting out one of the more time-consuming aspects of the ACH transfer. Some clients will hold funds in the balance until they need to transfer them out, reloading the balance as they expect higher payment volume.

Let’s imagine a scenario where a Dwolla API Client wants to payout to 100 different Customers.

Transfer 1 – Bank to Dwolla Balance

The first step will be to load the Dwolla Balance with enough funds to cover the payout. This can happen at any time in preparation for an expected payout scenario. The funds would be available in around three business days, as funds will need to be processed within the ACH Network.

Transfer 2 – Dwolla Balance to a Customer’s Bank

Once the balance has been loaded, the API Client can send out regular transfers or use the Mass Payment feature to disburse funds from their Dwolla Balance to their 100 end users’ banks.

Since funds were already within the Dwolla Network, this second payment will go out and can reach the destination Customer’s bank in as little time as the same day.

Instant Funds Transfers Between Balances

What’s faster than same-day payments? How about instant payments?Switching to a peer-to-peer (P2P) payments scenario, let’s imagine your application is facilitating a payment between two users. In this case, if the source Verified Customer has funds pre-loaded in their balance, a transfer would be created and funds will be immediately available in the receiving Customer’s balance. The receiving Customer would then have the choice of letting more funds accumulate or initiating a withdrawal to their linked bank account at any time.

Balance Ledgering

What if you want to designate portions of a Dwolla Balance for various purposes?

An example use case can include an application that helps students save for different goals. If a student transfers funds from their checking account to the balance, an application would utilize labels to portion out and assign different parts of the balance to a Label to properly designate their goals. Later on, they could push these funds back to their checking or savings account after a goal has been met.

Bank Line Item Consolidation

When sending funds to thousands of Customers at a time, there can be an issue of added noise when looking at the bank statements and paging through the thousands of line items. By preloading the balance, only a single debit is needed and tracked.

More Than a Feature

While this is not an exhaustive list on how the Dwolla Balance can be utilized for a wallet-like experience, the functionality greatly enhances an application and can create value for end users. Whether your app is paying out to hundreds of Customers at a time or simply transferring funds between two different Customers, the Dwolla Balance can be utilized in a variety of ways that make your application better.

Dwolla, Inc. is an agent of Veridian Credit Union and all funds associated with your account in our network are held in one or more pooled accounts at Veridian Credit Union. These funds may not be eligible for share insurance by the National Credit Union Share Insurance Fund. Dwolla, Inc. is the operator of a software platform that communicates user instructions for funds transfers to Veridian Credit Union.